Social Capital and Labor Market Networks

NBER Working Paper No. 23959Issued in October 2017, Revised in February 2018NBER Program(s):Labor Studies

We explore the links between social capital and labor market networks at the neighborhood level. We harness rich data taken from multiple sources, including matched employer-employee data with which we measure the strength of labor market networks, data on behavior such as voting patterns that have previously been tied to social capital, and new data – not previously used in the study of social capital – on the number and location of non-profits at the neighborhood level. We use a machine learning algorithm to identify potential social capital measures that best predict neighborhood-level variation in labor market networks. We find evidence suggesting that smaller and less centralized schools, and schools with fewer poor students, foster social capital that builds labor market networks, as does a larger Republican vote share. The presence of establishments in a number of non-profit oriented industries are identified as predictive of strong labor market networks, likely because they either provide public goods or facilitate social contacts. These industries include, for example, churches and other religious institutions, schools, country clubs, and amateur or recreational sports teams or clubs.

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